If you were laid off due to the economic unrest of 2020, you are not alone. According to Reuters, “The economy has recovered 12.4 million of the 22.2 million jobs lost during the pandemic.” This means that many are still job searching and looking for ways to make ends meet. 

Finding yourself in a financial crisis can shock and make you feel like there is no way out. However, the US has a way for struggling individuals to make a fresh start. If you are one of the millions with loans you can’t pay and no end in sight, bankruptcy could be your best option. 

Why File for Bankruptcy?

If you apply for bankruptcy chapter 7 or 13, you receive a reprieve from creditors and liens known as an “automatic stay.” The stay is an “injunction” in legal terms. It stops creditors from attempting to collect debts or enforce liens.

An automatic stay can help tremendously if you are facing a foreclosure or repossession. In a chapter 13 bankruptcy,  your attorney negotiates a way to pay your creditors some of the money you owe. The automatic stay is not permanent. 

In a chapter 7 bankruptcy, you can often keep your home or car if you are current on payments and don’t have much equity. Chapter 7 bankruptcy debt is permanently discharged. 

Creditor Can File a Motion for Relief

A creditor can file a motion for relief from the automatic stay. If the court grants the relief, the creditor gains permission to take collection actions against you. This allowed collection is despite your automatic stay. A common scenario is a lender asking the court for a motion for relief if you have a secured home or car loan backed by collateral.

If you’ve had a previously dismissed bankruptcy within the past year, it is more likely that a judge will grant a motion for relief to your creditor. Usually, you will only have 30 days of an automatic stay if you fall into this category of bankruptcy filers.

You don’t generally qualify for an automatic stay if you’ve had 2 or more dismissed bankruptcies in the past year. Work with an attorney if you believe your case for an automatic stay has merit. Your attorney can often find a way despite your past filings. To receive the stay, you would have to prove that you did not file previously in bad faith. 

Creditor Violations

Violation of an automatic stay is governed by 11 U.S. Code 362(k), which provides for damages, reimbursement of attorney’s fees, and potentially punitive damages if the violation is willful and causes injury to you.

If a creditor knows of your bankruptcy but continues to pursue payment or reclaim property from you, they violate your automatic stay unless they have received a motion for relief from your bankruptcy court. 

Ask your creditor to provide proof of any motions for relief before giving in to any demands. Also, consult with your attorney before paying anything during an open bankruptcy case. 

Making a Violation Case

To make a case against a creditor, you must establish that they knew of the bankruptcy automatic stay and deliberately chose to continue soliciting for payment anyway. 

One way to do this is by informing all creditors of your bankruptcy case number and your bankruptcy court’s name and location. You can do this by phone. You can also print the Notice of Filing from the court docket and send it by certified mail. Make sure to choose return receipt. This is a way to make sure the creditors know of your stay immediately. 

Keep any return receipts and for phone calls, record the date, time, and person’s name for each creditor so that you have proof of their knowledge. You can then hold the creditor accountable for future collection attempts. If you decide to file an application seeking damages, you have proof of the creditor’s violation with your carefully recorded data.

Take the Initiative

When you take the initiative to inform your creditors of your bankruptcy immediately along with pertinent information, you can even prevent a foreclosure or repossession that has already happened. 

A creditor who knows of your bankruptcy and continues in their activity to reclaim assets from you can face damages, contempt of court, and fines for their illegal choices.

Find Help

Talk with your consumer rights attorney if you believe a creditor has violated your automatic stay. A knowledgeable consumer rights attorney will know the applicable laws and practices in your state and lay out the facts of what is possible in your situation. Consumer rights attorneys focus on cases where businesses overstep and violate lawful boundaries to defraud consumers deliberately. If you are a victim of an unscrupulous company, contact us at LawZebra. We defend the rights of individuals across the country daily and want to help you find solutions.